Macroeconomics Concepts Quiz

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Questions and Answers

What is an aggregate market?

An economic model relating the price level and real production.

Define anomalies in the context of economics.

Security price relationships that appear to contradict a well-regarded hypothesis.

What is arbitrage?

A trading strategy designed to generate a guaranteed profit from a transaction.

When does an arbitrage opportunity occur?

When there is a price difference between assets that can be exploited for risk-free profit. Signup and view all the answers

What does Arbitrage Pricing Theory (APT) posit?

It posits that the expected return to a financial asset can be described by its relationship with several common risk factors. Signup and view all the answers

Define business risk.

The variability of operating income arising from the characteristics of the firm’s industry. Signup and view all the answers

Define coincident indicators.

A set of economic variables whose values reach peaks and troughs at about the same time as the aggregate economy. Signup and view all the answers

What is common stock?

An equity investment that represents ownership of a firm, with full participation in its success or failure. Signup and view all the answers

Explain Constant Proportion Portfolio Insurance (CPPI).

CPPI is a dynamic approach that adjusts asset allocation between risky and stable assets based on portfolio value. Signup and view all the answers

What are consumer cyclicals?

Stocks representing companies that make non-essential goods. Signup and view all the answers

Describe credit analysis.

An active bond portfolio management strategy designed to identify bonds that are expected to experience changes in rating. Signup and view all the answers